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Below the Quote on Budget Expectation Comments by Mr. Ajit Banerjee, Chief Investment Officer of Shriram Life Insurance

1. Topic: Balancing fiscal prudence with social responsibility

Quote headline: ‘Govt is in comfortable position to retain or better its fiscal deficit target’

Need to strike a fine balance between fiscal consolidation and social responsibility: Shriram Life Insurance’s Ajit Banerjee

The government in May reported a fiscal surplus of around Rs 1.6 trillion and revenue surplus of around Rs 2 trillion, primarily aided by more than double surplus transfer from the Reserve Bank of India (RBI) over what was estimated for this account and supported by strong dividend from Public Sector Banks (PSBs) together for 2024-25, robust tax revenues, and capex compression. At the outset, this showed that the government is in a comfortable position to retain or better its fiscal deficit targets given in the interim Budget for 2024-25.

Finance ministry sources also said that the Budget would stick to the fiscal deficit projection of 5.1 per cent of Gross Domestic Product (GDP) for 2024-25 as was pegged in the interim Budget. The government further said that the glide path, which entails narrowing the fiscal deficit further to 4.5 per cent of GDP during the next financial year, would also be retained.

A favourable fiscal deficit management by a country is preferred by global investors as it lends the country more stability. However, the finance minister would also be required to strike a fine balance between fiscal consolidation and need to accommodate requests from coalition partners for state-specific packages and announcements of some additional welfare schemes to address the needs of the vulnerable sections of the society. The government may also allocate funds towards the PM Awas Yojana or announce some benefits for those availing the affordable housing scheme.

Having said this, we broadly expect the government to stay on the path of fiscal consolidation. Though there are certain apprehensions about the adoption of populist measures due to the election verdict, but with the fiscal room generated by the RBI dividend and buoyant tax collections, this is unlikely to impact the pace of consolidation.

2. Topic: Govt to prioritise capex and infrastructure

Quote headline: ‘Govt’s push for capex and infra to remain at the forefront’

The core themes of the government's push for capex and infrastructure will remain at the forefront. We can expect continuity in policy reforms, with some measures/schemes leading to an increase in the rural consumption levels.

In this budget, we believe that the government would continue with its focus on infrastructural development and focus on making India into an Atmanirbhar Bharat.

3. Topic: Budget expectation for the renewable energy sector

Quote headline: ‘Expect incentives and govt support to continue for renewable energy industry’

India has also been pushing on with its renewable energy ambitions, as the nation added record renewable energy capacity of 18.48 GW in 2023-24, which is over 21 per cent higher than 15.27 GW a year ago, according to the Ministry of New and Renewable Energy data. However, renewable energy industry experts say there is a need to add at least 50 GW of renewable energy capacity annually for the next six years to meet the ambitious target of 500 GW of renewables by 2030. Therefore, we can expect incentives and government support to continue for this industry.

4. Topic: What’s in store for export-oriented sectors?

Quote headline: Expect export incentives in Budget 2024

In the fourth quarter of FY24, India's merchandise trade deficit shrank to its lowest in 11 quarters, standing at 5.4 per cent of the GDP. This improvement was driven by a rise in merchandise exports, reaching a five-quarter high of 12.9 per cent, coupled with a decrease in merchandise imports to an 11-quarter low of 18.3 per cent of the GDP. Therefore, we may expect the government to announce additional incentives/exemptions to export-oriented sectors to enable them to remain competitive in the world market. India has also become the GCC (Global Capability Centre) hub of the world, so we can expect some policies/sops in that direction which can enhance this position further.

5. Topic: Manufacturing sector gains momentum with PLI push

Quote headline: ‘Expect PLI to be enhanced to other sectors as scheme has shown positive results’

The Indian government has been taking substantial measures for decades to ensure that India reaches its true manufacturing prowess. Post Covid-19, just as global companies were looking to shift their manufacturing units from China to diversify options, India has emerged as a robust alternative. The government has deployed schemes like the Production-linked Incentive (PLI) to invite global companies to manufacture in India, across a host of sectors. We can expect the PLI scheme to be enhanced to certain other sectors as well in the manufacturing space as it has started bearing positive results.

6. Topic: Making India into an ‘Atmanirbhar Bharat’
    

Quote headline: ‘Expect a budget that would tread on the path of making India into an Atmanirbhar Bharat’

‘Expect budget to focus on fiscal consolidation and inclusive growth policy’

Overall, we are primarily expecting a budget which would tread on the path of making India into an Atmanirbhar Bharat, keeping its focus on fiscal consolidation, and pursuing an inclusive growth policy without losing sight on the need for improvement in the overall condition of the vulnerable segment of the society.

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